(LoanSafe.org) – For those out there trying to get out from under a mortgage, there are very few solutions that you will find. Many homeowners are so far underwater and have second mortgages or HELOC’s that there may be now way out for some of them. Bankruptcy may be an option, but many consumers simply would like to avoid BK because of either a security clearance or the long term negative credit affects that it would bring on.
If you are considering bankruptcy in order to prevent defaulting on your home, be aware that bankruptcy can ultimately be as damaging as a foreclosure. In cases when people are facing either of these options because they owe far more than what their house is worth or just can no longer mange their monthly payments, some people try and comfort themselves by just not thinking of the matter or just pushing it aside.
This is by far one of the worst things you could do in this circumstance.
Even if you haven’t figured out how you are going to make things work, not taking action can be quite deadly, especially when the mistake could be found by tracing your own steps. You’d probably want to try fixing your financial issues as soon as possible once you analyze the problem.
In many situations where homeowners are questioning whether or not they should continue paying their mortgage, it’s most likely because they owe more than their home is initially worth. Although taking out second mortgages puts the blame on a lot of people in this case, real estate depreciation has been a long lasting factor over the last three years. Homes these days have been decreasing in value, rather than increasing.
What to do in the case of bankruptcy?
- The first step that everyone should take is to figure out where they stand, and why their in this position.
- Consider how much you owe on the home at this moment. Mostly focus on how much you owe on your 1st mortgage first.
- After this look at equity loans as well as any lines of credit.
- Find out what your home is exactly worth. This can be easily obtained at real estate websites such as Zillow or Trulia, where you can get a fair estimate. Or check out local comps to see what other hoes are selling for in your neighborhood for an even better estimate.
- Find out exactly how much other debt you owe such as car loans, credit card debt, and other personal loans that you have either broken your obligation to pay, or that you still owe on.
- Consider personal expenses. Make a list on how much you spend on groceries, clothes ext.
- Consider what you’re spending in your income with these expenses
If you did analyze all the steps above, added them all up, and are facing the possibility of bankruptcy, long story short, it is probably because your income is not sufficient enough to support all of these expenses.
This truth definitely hurts, but it is the truth.
This seems to be the case with a lot of people facing bankruptcy. A second mortgage is large enough alone to put someone in debt, on top of all of the other expenses humans have been accustomed to acquiring long before the real estate market crashed. Credit cards, car loans, and student loans are some debts that are causing people to be in this situation.
Another short answer that could supplement as a solution for the average homeowner is to merely create a budget.
And if you already had one, but are still facing the possibility of bankruptcy long after your budget has collapsed on you, you’ll just have to create new one. Hopefully, as an obvious solution most people will have to cut back on many of their personal expenses including cell phone, going out to est, TV, etc. Organization and control is the key to avoiding bankruptcy in the first place, and even more crucial to surviving the impact of a bankruptcy.
If you cannot manage to make a monthly budget on your own that fits your needs, the obvious next step that should be taken is to seek professional help. This could be your best step you could take, especially if it’s from a non-profit organization like the National Foundation for Credit Counseling (website: http://www.nfcc.org/). A professional could offer excellent inside information that could help you out, such as:
- Helping you conform a budget
- Renegotiating some of your consumer debt
- Aiding you in getting information on a mortgage modification to help to lower your mortgage payment
- Helping you to consolidate your debt
Teaching you ways to borrow money from a personal source such as from a family or friend. At first thought, this could seem like a somewhat complicated situation, but it’s better than taking more equity out of your home, even if you have just enough to keep you up for a while(which in case of facing bankruptcy you probably wouldn’t)
In the case of owing more money than your home is actually worth, refinancing is probably not an option for you. Whether your home will ultimately appreciate back up to a point where you owe less than the market value of your home, depends mainly on how long you are willing to wait.
In many cases, bankruptcy can be declared, and you’ll be able to keep your home. Seasoned attorneys that are experienced with handling a mortgage and other professionals hold information on this subject, but if your goal is to avoid filing BK, there are options that can be taken to avoid the matter, even if it involves hard work.
As always, consult with at least three of the most experienced lawyers that you can find in your state in order to get educated on your best legal options to deal with your particular situation.